UNIT 4

Production System

Production System refers to that set-up of the organization, which is

engaged in producing products. It is an activity in which resources are put
together and converted into a product. This process enables adding value
to that product. Further, the process takes place as per the policies of the
management.

Characteristics of Production System

 Objective: Because the process of production is an organized

activity. So, it takes place with an objective.
 Transformation: Conversion of various inputs into outputs takes
place in this process.
 Feedback: Feedback about activities is necessary. This helps in
controlling and improving the performance of the system.

The production system is a part of a larger system – the business firm.

The production system can be viewed as a framework or skeleton of
activities within which the creation of value can occur. Briefly, the
difference between the value of inputs and the value of outputs
represents the value created through production activities. At one end of
the production system are the inputs and at the other end are outputs.
Connecting the inputs and outputs are a series of operations or processes,
storages and inspections. Fig. 2.1 represents a simplified production
system.
The concept of production system is applicable to both production of
components and production of services as well. The production of any
component or service can be viewed in terms of a production system. For
example, the manufacture of furniture involves such inputs as wood, glue,
nails, screws, paints, sand paper, saws, workers etc. After these inputs are
acquired, they must be stored until ready for use.

Examples of service industries which use production concepts are

hospitals, railroads, airlines, supermarkets, automobile repair shops, etc.

Input goes into the system. When going through the system, it becomes
transformed in some way making the output different than what came in,
resulting in something with different characteristics. Of course, a system
may have more than one input and output.

Input Output Model of Production System:

It is one of the basic models of the production system. A production

system is the set of interconnected input-output elements and is made up
of three component parts namely inputs, process and outputs (Fig. 2.3). A
wide variety of inputs are transformed so that they give out a set of
outputs. The transforming process can be complicated and the design of
an actual input and output system for manufacturing may be expensive
and difficult.

The efficiency of an engineering system (a machine)

= Output/Input ≤ 1, a system with output equal to input is considered to

be ideal. But in a system of Production Management this definition of
efficiency means utter failure and ultimately the end of the business. In
economic system, the efficiency has to be greater than one – which
means a state of profit. A production management system comprehends
and integrates both engineering and economic criteria in its activities

There are usually five types of ways of transforming input into output:

 Separating – One item enters and two or more exit. Example: A

wooden plank is cut into two.
 Putting together – Several items enter and one exits. Example:
Wooden planks that are glued together.
 Detaching – An item enters and exits shaped differently, alongside
waste. Example: A block of wood is shaped with a lathe.
 Forming – An item enters and exits in a different shape, without
waste. Example: A piece of metal is shaped by hammering the
object.
 Quality adaptation – An item enters and exits with different
characteristics. Example: Surface treatment of a metal object.
Components
Components are simply the parts that together make up a larger system.

Components can be material, digital, and nonmaterial alike. An idea or

organisation can also be a component of a system, so components can
sometimes be difficult to define.

It is when the components are assembled into a system that we achieve

the goal. And the components only work in the context of the other
components.

Classification of Production System

One should note that the classification of any production system relies on
many factors. These factors include type and volume of production.
Generally, there are three types of production systems divided into two
categories:

1. Intermittent production
 Job Production
 Batch Production
2. Continuous Production
 Mass and Flow Production
Intermittent production

As the name signifies, the production process takes place at irregular

intervals to produce a number of different products with the help of one
production line. Manufacturers use this system to produce low-volume,
high-variety products.

Intermittent refers to something that begins and ends at irregular

intervals of time. In this production system, goods and services are
produced based on customer orders to fulfil their needs rather than
keeping them stored for future transactions. Production facilities used are
flexible enough to produce wider varieties of goods based on the orders
and other requirements of customers.
For example, a tailor works based on the number of orders received from
his/her customers. Accordingly, he/she stitches clothes for every customer
independently as per the measurement and size of every individual
customer. Thus, it can be said that stitching is not done on a continuous
basis. And, stitched clothes (i.e. goods in this example) are made on a
limited scale and the production is directly proportional to the number of
orders received from customers.

The following are the industries where the intermittent production system
is used:

 Hospitals
 Workshop
 Film making
 Building and bridge construction
 Furniture manufacturing companies
The intermittent system is much more complex than continuous
production because every product has to be treated differently under the
constraint of limited resources.

The intermittent system can be-effective in situations which satisfy the

following conditions:

 The production centres should be located in such a manner so that

they can handle a wide range of inputs.
 Transportation facilities between production centres should be
flexible enough to accommodate a variety of routes for different
inputs.
 It should be provided with the necessary storage facility.
 Producing goods in smaller quantities
 Companies with unbalanced workloads
 Organisations with high skilled processes carrying varied design
works
 Highly flexible production system
 Workplaces with frequent changes in the planning process and
scheduling
 Industries with higher production cost units
Characteristics of the Intermittent System:

The following characteristics are;

 The flow of production is intermittent, not continuous.

 The volume of production is generally small.
 A wide variety of products are produced.
 No single sequence of operations is used and periodical adjustments
are made to suit different jobs or batches.
 Process layout is most suited.

Job Production

It involves the manufacturing of one or a few products within a

predetermined time and cost. This is because the production takes place
as per the specifications of the customer. Therefore, the products in job
shop production are high in variety and low in volume. Also, they aim to
meet the requirement of the specific order.

The machines are general purpose. These are set up in different

departments. Further, each job has a unique technological requirement.
Also, it requires processing on machines in a definite order. Its sub-
classification relies on the production of job

1. Only once
2. At irregular intervals
3. At regular intervals
Examples: Boutique, Automobile service center, typing shops, etc.

Characteristics of Job Shop Production

 Multiple varieties of products and low volume

 Machines and facilities are general purposes
 Operators are highly skilled and can perform each job in an effective
manner. They take each job as a challenge due to its uniqueness.
 There is a huge stock of materials, tools, equipment, and parts.
 In-depth planning is important to determine the need of each
product, and capacities for each work center, and to order priorities.
Batch Production

Batch production is a manufacturing method where the products are

produced in specified quantities or batches before moving on to the next
phase of production.

 However, this technique may cause finished goods inventories to

build up in between batches, which could lead to stockouts or
overstocking.
Batch Production In Manufacturing Explained

Batch production is a manufacturing approach that involves the

production of goods in specific, predetermined quantities or batches
before transitioning to the next set of items. In this method, a
predetermined number of identical or similar products are produced
together, and the entire batch is completed before the production line
shifts to the next set of products.

This approach is beneficial in situations where customization is required or

when the demand for a particular product is not sufficient to opt for
continuous production. It is appropriate for industries with diverse product
specifications and fluctuating demand.

Advantages And Disadvantages

The advantages of batch production are:

  The production method allows for easy adaptation to changes in
product specifications or the introduction of new products without
substantial retooling.
 Since each batch is produced in a finite quantity, the manufacturers
can implement rigorous quality control measures. This enhances
consistency and minimizes defects within each batch.
 This production strikes a balance between the efficiency
of mass production and the option for customization. It is cost-
effective for scenarios with moderate production volumes.
 Manufacturers can efficiently produce a variety of products or
product variants within the same facility and cater to diverse market
demands.
Some disadvantages of batch production are:

 The need to change production processes for each batch introduces

set-up times, which leads to disruptions and reduced overall
efficiency.
 Efficient production scheduling is essential in this production. It
requires careful planning to minimize downtime between batches.
 This production may not achieve high economies of scale , which
may result in higher per-unit production costs.
 Equipment may not be fully utilized during transitions between
batches, leading to inefficiencies and underutilization of resources.
 This method can result in the accumulation of finished goods
inventory between batches, resulting in overstocking or stockouts.

It is that type of production system in which the job passes through

functional departments, in lots. These lots are nothing but batches and
each lot has a different routing. It involves manufacturing a confined
number of products. They are similar and produced in large volumes
These products are produced at periodic intervals and stocked awaiting
sales of the batches.

Examples: Production of tyres and tubes, ready-made garments,

pharmaceuticals, and cosmetics.

Characteristics of Batch Production

 The production runs are shorter

 Flexible plant and machinery
  Plant and machinery set up are used to the product in the lot. After
that, the setup undergoes a change so as to process the next batch.
 Lower lead time and cost.

Continuous Production

Continuous or flow production refers to the manufacturing of large

quantities of a single or at most a very few varieties of products with a
standard set of processes and sequences. The mass production is carried
on continuously for stock in anticipation of demand.

In this production system, the products are constantly produced based on

demand and forecasts. The products are manufactured on a larger scale
for sale and storage purposes, and not at the customer’s request. The
inputs and outputs in this system are standardised together with the
process of production and the sequence.

For example, the production system of the food industry is based on the
demand forecast. The production of food is done on a large scale and on a
continuous basis. Similarly, in the fuel industry, large-scale production and
processing of crude oil and other raw sources takes place on a continuous
basis to get the usable form of fuel and compensate global energy
demand.

Characteristics of Continuous Systems:

The following characteristics are;

1. The volume of output is generally large (mass production) and

goods are produced in anticipation of demand.
2. The product design and the sequence of the operations are
standardised i.e. identical products are produced.
3. Special purpose automatic machines are used to perform
standardised operations.
4. Machine capacities are balanced so that materials are fed at one
end of the process and the finished product is received at the other
end.
 5. Fixed path materials handling equipment is used due to the
predetermined sequence of operations.
6. Product layout designed according to a separate line for each
product is considered.
7. No storing of Work in Process (WIP) goods between two processes is
done.

Advantages of a Continuous System:

The following advantages are:

 The main advantage of the continuous system is that work-in-

progress inventory is minimum.
 The quality of output is kept uniform because each stage develops
skill through repetition of work.
 Any delay at any stage is automatically detected.
 Handling of materials is reduced due to the set pattern of the
production line. Mostly the materials are handled through conveyor
belts, roller conveyors, pipelines, overhead cranes, etc.
 Control over materials, cost, and output are simplified.
 The work can be done by semi-skilled workers because of their
specialisation.
Disadvantages of Continuous System:

The continuous system, however, is very rigid and if there is a fault in one
operation the entire process is disturbed. Due to continuous flow, it
becomes necessary to avoid piling up of work or any blockage on the line.
Unless the fault is cleared immediately, it will force the preceding as well
as the subsequent stages to be stopped. Moreover, it is essential to
maintain stand-by equipment to meet any breakdowns resulting in
production stoppages. Thus investments in machines are fairly high.

Types of Continuous System:

Continuous production is of the following types: (i) Mass Production (ii)

Process/Flow Production
1. Mass Production:

This production refers to the manufacturing of standardised parts or

components on a large scale. Mass production system offers economies of
scale as the volume of output is large. Quality of products tends to be
uniform and high due to standardisation and mechanisation. In a properly
designed and equipped process, individual expertise plays a less
prominent role.

Characteristics of Mass Production

 Standardization of sequence of product and process

 Special purpose machines dedicated to higher production capacities
and output rates
 Product volume is large
 Cycle time of production is shorter
 Lower in process inventory
 Balanced production lines
 The continuous flow of material components and parts. Also, it does
not have any backtracking.
 Easy production planning and control
 Automatic material handling

2. Process/Flow Production:

Production is carried on continuously through a uniform and standardised

sequence of operations. Highly sophisticated and automatic machines are
used. Process production is employed in the bulk processing of certain
materials. The typical processing Industries are fertiliser plants,
petrochemical plants, and milk dairies which have highly automated
systems and sophisticated controls.
Examples: Cement factory, sugar factory, chemical processing, computer
keyboards, and oil refinery

Characteristics of Flow Production

 Conversion process whereby successive units of output undergo the

same operation sequence.
 Use of specialized equipment positioned along the production line
 24x7 hours, all over the years
They are not labour-intensive and the worker is just an operator to
monitor the system and take corrective steps if called for. On the basis of
the nature of the production process, flow production may be classified
into Analytical and Synthetic Production.

 Analytical Process: In the Analytical Process of production, the raw

material is broken into different products e.g. crude oil is analysed
into gas, Naphtha, petrol, etc. Similarly, coal is processed to obtain
coke, coal gas, coal tar, etc.
 Synthetic Process: Synthetic Process of production involves the
mixing of two or more materials to manufacture a product, for
instance, lauric acid, myristic acid, and stearic acid are synthesised
to manufacture soap.
3. Assembly Lines:

Assembly line is a type of flow production which is developed in the

automobile industry in the USA. A manufacturing unit prefers to develop
and employ an assembly line because it helps to improve the efficiency of
production. In an assembly line, each machine must directly receive
material from the previous machine and pass it directly to the next
machine.

Machines and equipment should be arranged in such a manner that every

operator has free and safe access to each machine. Space should be
provided for free movement of forklifts, trucks, etc. which deliver
materials and collect finished products.
Difference Between Intermittent and Continuous Production
System

1. Layout Type: In the case of job and batch production process layout
is appropriate. Whereas for mass or flow production system product
layout is best.
2. Product type and design: In the case of job and batch systems, a
wide range of products are produced but in small quantities. Hence,
product design changes as per the specifications of the product. In
contrast, for a continuous production system, either a few or one
product is produced in bulk. And the design of the product is
standardized, in which changes do not occur at frequent intervals.
3. Machine set up time: Machine set up time is high in the continuous
production system as compared to the intermittent system of
production. This is due to the frequent changes in the specification
of products and design.
4. Order size: Order size is small in the intermittent products. Whereas
the same is large in continuous production.
5. Machine Investment: High in case of intermittent production and low
for continuous production.
6. Material Handling cost: High in the intermittent production system.
However, material handling cost is low in the case of continuous
production.
7. Production capacity: In an intermittent production system, the
production capacity is not fully utilized. But, in the continuous
production system, it is completely utilized.
Table distinguishes between intermittent production system and
continuous production system:

S. FEATURE INTERMITTENT CONTINUOUS

NO PRODUCTION SYSTEM PRODUCTION SYSTEM

1. Nature of Goods are produced Goods are produced

product based on the customer based on future
requirement. transaction and stocking
purposes.

2. Process Flexible production Constant process and

flexibility process and can be cannot be changed
S. FEATURE INTERMITTENT CONTINUOUS
NO PRODUCTION SYSTEM PRODUCTION SYSTEM

changed any moment. repeatedly.

3. Production Small scale goods Goods are produced in

Scale production with no larger scales and
economies. therefore, exists
economies.

4. Unit cost The cost of production Production cost is low

may be high due to due to large-scale
production on smaller production.
scales.

5. Products Manufactures a wide Only particular product

range range of products. types are manufactured.

6. Staff The staff here is with Here managerial skills

high technical abilities. are limited when
compared with
intermittent.

7. Instructions Deals with short-term Requires long-term plans

instructions as the as it involves
products are limited. manufacturing a larger
amount of production.

8. Final No need to store the Need to store the goods

product products for future and the final products till
storage transactions the customer orders

9. Location Location change can be It is difficult to change

change done easily the location

10. Invested Less capital investment Involves huge capital

capital investment

Production Planning and Control ( PPC )

Production is done by manufacturing different things with various
processes. Planning looks ahead, anticipates possible difficulties, and
decides in advance about the production. The control phase makes sure
that the programmed production is constantly maintained.

Production planning and control may be defined as the direction and

coordination of the firm’s material and physical facilities towards the
attainment of pre-specified production goals, most efficiently and
economically.

 According to Samuel Elion: “The highest efficiency in production is

obtained by manufacturing the required quantity of the product, of
the required quality, at the required time, by the best and cheapest
method.”
 To attain this target, management employs production planning and
control, the tool that co-ordinates all manufacturing activities.
 The four factors mentioned above—namely: quantity, quality, time
and price encompass the production system, of which production
planning and control is the brain.
 Production control will be in action when production activity begins.
It can comprise the following activities
1) Determination of the required product mix and factory load to satisfy
customer’s needs.
2) Matching the required level of production to the existing resources.
3) Scheduling (Scheduling is the process of arranging, controlling, and
optimizing work and workloads in a production process or manufacturing
process. Scheduling is used to allocate plant and machinery resources,
plan human resources, plan production processes and purchase materials)
and choosing the actual work to be started in the manufacturing facility”
4) Setting up and delivering production orders to production facilities.

Relations between Production Planning and Control

 There exists a very close inter-relationship among the phases and

functions of the production planning and control and they are
mutually supporting. For instance, realistic planning is quite
dependent upon the data which is compiled during the function
phase. Action, in turn, is dependent upon continuous planning of the
work to be performed by the activity. Follow-up is the comparison of
the work that was originally planned against the work actually done.
It must be understood, that if the plans are lacking, or not stated
properly or are recorded inadequately in terms of objectives,
starting and completion dates, and utilization of resources, there will
not be a basis for a comprehensive follow up phase.
 The planning and control is an integral part of the system and it is
very difficult to isolate one from the other. They are so inter-related
that one is always identified with the other. Planning concerns with
the formulation of production strategies and targets for the
enterprise whereas control is vested with actual implementation and
execution of planned Objectives. Production planning determines
the operations required to manufacture the product and control
regulates and supervises these operations. Through production
control information the organization can locate shortcomings in the
planning process and the necessary modifications can be done at
the time of planning in the future. Similarly, production control
operations can be improved to adjust with the planning
requirements.
 There are three M’s of production viz, Men, Materials and Machines
without which production cannot be carried out.
 The production planning and control (P.P.C.) system integrates and
coordinates the use of manpower, machines, and materials for
efficient production to meet the sales requirements.
Need of PPC

PPC is needed to achieve:

1) Effective utilization of the firm’s resources.
2) To achieve the production objective concerning quality, quantity, cost,
and timeliness of delivery.
3) To obtain the uninterrupted production flow to meet the customer
demands concerning quality and committed delivery schedule.
4) To help the company to supply a good quality product to the customer
continuously at company rates.

Objectives of PPC are discussed below:

1. To design a system and plan, by which production may be carried out

to meet the promised delivery date consistent with minimum cost and
quality standard.
2. To ensure efficient utilization of production facilities.
3. To coordinate the production activities of different departments.
4. To maintain adequate but not excessive stock of raw materials, work in
process, and of finished goods to meet production requirements and
delivery schedules at the most economical level.
5. To ensure the production of the right product in the right quality at the
right time.
6. To maintain flexibility in manufacturing operations, to accommodate
rush jobs or to meet contingencies.
7. To co-ordinate labor, machines, and equipment most effectively and
economically.
8. Ensuring smooth flow of materials by eliminating bottlenecks if any, in
production.
9. Establishing targets and checking it against performance.
10. To provide alternative production strategies in case of emergencies.
11. To determine the nature and magnitude of various input factors to
manufacture the desired output
12. The PPC department guides production by preparing and issuing
manufacturing orders which direct the use of facilities and material and
allocate labor to the output of the required quantity of products of the
required quality.

Factors affecting on PPC

PPC is affected by the different factors, which all are discussed below:

1) Use of Computers:
Modern factories are using office automation equipment like PC, punch
cards, etc. It helps accurate computation of required of men and
machines.

2) Seasonal Variations:

The demand for certain products is affected by seasons, for instance

umbrellas and raincoats during the monsoons and outputs. Production
planning and control must consider such changes while planning and
control activities of inputs and outputs.

3) Test Marketing:

In an aggressive marketing strategy new products are to be test marketed

to know the trends. This is a short- cycle operation, intermittent and often
upsets regular production.

4) After Sales Service:

This has become an important parameter for success. In after-sales

services, many items are returned for repair. These are unscheduled work
and also overload the production line.

5) Losses due to Unpredictable Factors:

Losses occur due to accidents, fire, and theft of production inputs, mainly
materials and components. These are unpredictable. Shortage of input
due to such factors upset the planned production schedule in time and
quantity.

6) Losses due to Predictable Factors:

There are losses of inputs, due to natural engineering phenomena like

production losses and changes in the consumption of materials and the
occurrence of defectives.

7) Production of Order:

There are occasions when last-minute prioritization of existing orders due

to external pressure takes place. These changes in priority are often
decided by a sufficiently high level of management.

8) Design Changes:

Design changes are issued by R & D and the engineering department. This
will necessarily force production planning control to change the input
materials and process.

9) Rejection and Replacement:

There are occasions when sub-assemblies or finished goods are rejected
during a stage or final inspection. Production planning and control must
cater for contingent plans to take care of rework without affecting
scheduled quality

Functions of PPC

A production planning and control (PPC) system has many functions to

perform like:-

1. Planning phase:- Forecasting, order writing, product, product design,

material control, tool control, loading, etc.
2. Action phase:- Dispatching
3. Control phase:- Data processing, expediting and replanning
 Production planning and control can be viewed as the nervous
system of the production operation.
 This function aims at the efficient utilization of material resources,
people, and facilities in any undertaking through planning,
coordinating, and controlling the production activities that transform
the raw material into finished products or components as the most
optimal manner.
 All the activities in the manufacturing or production cycle must be
planned, coordinated, organized, and controlling to its objectives.
 Production planning and control as a department plays a vital role in
manufacturing organizations.
 It is clear from the name that it is something about planning.
Planning is defined as setting goals. Production planning and control
provides different kinds of information to different departments.
 It provides information about available manufacturing resources to
the marketing department. Marketing department receives orders
 according to that information. Similarly, it coordinates with other
departments and provides relevant information.

Three main phases of PPC:

1. Planning phase
2. Action phase
3. Follow up or control phase

 These three phases as mentioned above make up the main body of

functions of PPC. There are other secondary functions that are
essential contributors to the efficient performance of production,
planning, and control.
 Also there are other functions that are supported by these three
phases which are not generally considered to be direct functions of
production planning and control.
 These include quality control- cost control and so on.

f
unction of ppc
 (A) Planning Phase:
Prior Planning:

 Prior planning implies that a course of action is established in

advance. The whole activity must be planned and exists on paper
before the very first action takes place
1. Fore-casting (Estimation of future work): Fore-casting is defined
as the estimation of future activities i.e. the estimation of type,
quantity, and quality of future work. These estimates provide the
basis for establishing the future requirement for men, materials,
machines, time, and money.
2. Order writing (Preparation of work authorization): If the work is to
be controlled, it must begin with a specified documents authorising
it. So it means giving the authority to one or more persons to do a
particular job.
3. Product design (Preparation of specifications): After the work
authorization has been prepared the next step is to collect the
information necessary to describe the work in detail. This includes
blueprints or drawings, a list of specifications, a bill of material, and
so on.
Action Planning:

In any type of work activity the following steps are necessary for planning
details of the work to be done:

1. Process planning: The determination of the most economical method of

performing an activity, all factors being considered. Routing. The
arrangement of work stations is determined by the route.
2. Material control: Determination of material requirements and control of
material (inventory control).
3. Tool control: Tool control may be subdivided into two categories :
(a) Design and procurement of new tools.
(b) Control storage and maintenance of tools after procurement.
4. Loading: Determination and control of equipment and manpower
requirements. Loading may be defined as the assignment of work to the
facility. The facility may be equipment, manpower, or both.
5. Scheduling: Determination when the work is to be done. Scheduling
consists of time phasing of loading (workload) i.e., setting both, starting
and ending time for the work to be done.

The common practice dictates that routing, loading, and scheduling be

performed simultaneously.

(B) Action Phase:

  The work is started in the action phase. There is only one production
planning activity in the action phase i.e., dispatching. Dispatching is
the transition from the planning phase to the action phase.
 It consists of the actual release of detailed work authorization to the
work centers.
(C) Follow up or Control Phase:
 Once the work is started in an activity it is necessary to evaluate
continuously the progress in terms of plan so that deviations can be
detected and corrected as quickly as possible. The control phase
accordingly consists of two parts:
Progress report:
1. Progress reporting: (Data collection). The first step in progress reporting
is to collect data for what is actually happening in the activity (Progress of
work).
2. Data interpretation. After the data has been collected, then it is
necessary to interpret it by comparing the actual performance against the
plan.

Corrective Action:
1. Expediting. If the data collected from the production unit indicates that
there is a significant deviation from the plan and the plan cannot be
changed, then some action must be taken to get back on plan.
2. Replanning. It should be emphasized that the plan is not to be changed
but to be followed, however, if after expediting to correct deviation it is
found that, it is impossible to perform according to plan. It would be
necessary to replan the whole affair. It may also be found that there were
errors made while developing the original plan. In all such cases
replanning is necessary.

Aggregate Planning (AP)

Aggregate plans act as an interface between strategic decision (which

fixes the operating environment) and short term scheduling and control
decision which guides firm’s day-to-day operations.
The aggregate planning concentrates on

-scheduling production,

-personnel and

-inventory levels

during intermediate term planning horizon such as 3-12 months.

Aggregate planning typically focuses on manipulating several aspects of

operations

-aggregate production,

inventory and

personnel levels

to minimize costs over some planning horizon while satisfying demand

and policy requirements. In brief the objectives of AP are to develop plans
that are feasible and optimal.

Aggregate planning: (i) Aggregate Production Planning (ii) Aggregate

Capacity Planning

Aggregate Production Planning: indicates the level of output.

Aggregate Capacity Planning keep capacity utilization at desired level

and test the feasibility of planned output.

Decision options in Aggregate Planning

Decision options are basically of 2 types:

(i) Modification of demand for a product.

(ii) Modification of supply of a product.
(i) Modification of demand
Demand can be modified in several ways:
(a) Differential pricing: It is often used to reduce the peak
demand or to increase the off period demand. Some examples
are: reducing off season fan/woollen item rate, reducing the hotel
rate in off season.
(b) Advertising and promotion: These methods are used to
stimulate/smooth out demand. Advertising is generally so timed
 as to increase demand during off period and to shift demand
from peak period to the off period.
(c) Backlogs: Through the creation of backlogs, the
manufacturers ask customers to wait for the delivery of products,
thereby shifting the demand from peak period to off period.
(d) Development of complementary products: Producer, who
produces products which are highly seasonal in nature, applies
this technique. Ex: Refrigerator company produce room heater,
TV Company produces DVD, etc.

(ii) Modification of supply

There are various methods of modification of supply.

(a) Hiring and lay off employees: The policy varies from
company to company. The man power/work force varies from
peak period to slack/off period. Accordingly, firing/lay off
employee is followed without affecting employee morale.
(b) Overtime and undertime: Overtime and undertime are
common options used in cases of temporary change of demand.
(c) Use of part time or temporary labour: This method is
attractive as the payment of part time/temporary labour is less.
(d) Subcontracting: The subcontractor may supply the entire
product/some of the components needed for the product.
(e) Carrying inventories: It is used by manufacturers who
produces items in a particular season and sell them throughout
the year.

Benefits of PPC

As a best practice for quality assurance and quality control, the main goal
of production planning and control is to maximize the materials,
workforce, productivity time, and other resources used in the process of
manufacturing. With this technique, production managers also primarily
aim to ensure that production results are according to set quality,
quantity, and schedule.

 Enhance material procurement – As a way to improve the

procurement process, better communication with suppliers and
other third-party vendors at the planning stage helps lead to
accurate sourcing and allocation of materials.
 Improve production time – Proactively identify if there would be
challenges, bottlenecks, or causes of production delays ahead of
time. Greater visibility in the production process helps teams
promptly meet production schedules and demands.
 Reduce production costs – With a well-planned and constantly-
monitored production, businesses can utilize their resources
efficiently and effectively. Lessen production costs to their ideal
level while still ensuring that the quality of goods and services is not
compromised.
 Minimize resource waste – Maintain inventory at optimal levels with
the execution of strong production planning and control. Avoid
discrepancies between material supply and material demand to
avoid waste of resources.
 Streamline production process – When production managers and
team members follow a standardized approach in the production
process, it’s easier to spot inefficiencies, prevent production delays,
and identify further opportunities for growth.
 Intelligent flow of raw and other materials in the production line
 More calculating cost reduction
 More interaction between different business areas
 Data-based decision making